Date: March 13, 2024
1. What is your view on BW not paying dividends yet again? Has SIAS received similar complaints from minority shareholders?
SIAS regularly receives feedback from shareholders who are disappointed with a listed company’s performance or perceived unfair treatment, such as instances where a company opts to generously compensate its executive management team while withholding dividends to shareholders. In recent years, BW has faced significant challenges, such as a trading suspension on SGX and receiving a notice of compliance from SGX RegCo due to concerns regarding its business model and its relationship with its primary import agent in China. Based on the financial results, the group generated strong operating cash flow and the group supposedly holds cash and cash equivalents of nearly S$574 million. It does appear that BW has the capacity to pay dividends.
2. Is this common among the listcos here? Do you notice any other listcos that are not paying dividends but have high levels of net cash?
Yes, there are some companies that have high levels of cash and most of them do pay some dividends.
Companies often cite “uncertain business climate” as the reason to conserve cash. However, in the world of business, when is the business environment ever certain? And even if a company finds itself in a “certain” business climate, does it then make sense for the company to invest in the business? At the end of the day, all businesses have risk. It is up to a good board and the company to balance paying dividends to shareholders and reinvesting in the business.
3. Is it an obligation for companies to pay a dividend, and what should a company do when they do not intend to pay a dividend but are cash-rich like BW?
Shareholders can be more pro-active in engaging with the company and independent directors to understand the listco’s targeted capital structure and its capital investment needs. Usually, young companies have to invest in growth or there are capital-intensive industries, such as infrastructure and thus these may not have the capacity to pay dividends. Shareholders first have to judge the ability to pay dividends by the company. Next, they have to assess how shareholder-friendly the company is. In the case of BW, it does appear that they have the capacity to pay dividends but have held back. This is not in the interest of shareholders of BW.
In the previous FY (2022), the top two were paid $12.5 – $12.75 million each while the CEO was paid $7.5 – $7.75 million. Also, based on the Interested/Related Person Transactions (IPT/RPT) disclosure, it does appear that close relatives of the co-chairs and the CEO received substantial freelance commissions, marketing fees and consultancy fees in FY2023. (pages 29 and 35)
All in all, it does seem that the company is rewarding the management team handsomely via remuneration and not providing shareholders with returns in the form of dividends.
4. What is your advice to minority shareholders who invest in companies like BW?
Shareholders should engage the company and the independent directors at the AGM on this matter.
David Gerald
President and CEO
SIAS
